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Pursuant to a congressional request, GAO reviewed the status and progress of the demonstration projects funded under approved cooperative agreements in the Department of Energy's (DOE) Clean Coal Technology (CCT) Program.

GAO found that: (1) 15 of the 32 ongoing funded projects have experienced delays, cost increases, and reductions in scope; (2) most ongoing projects have not progressed far enough for DOE to assess whether they will ultimately achieve their performance objectives and, as of September 1991, only three projects had completed the demonstration phase; (3) DOE invested about $21.2 million in 5 of the 13 projects that had been withdrawn from the program; (4) DOE funded some projects that may have limited potential for return on the federal investment, since those projects' technologies may have been commercialized without federal assistance; (5) it was questionable whether DOE had done all that it could to ensure that its investment was adequately protected, since it continued to fund some projects that were experiencing financing problems and were eventually withdrawn from the program; (6) DOE improved its management controls over project costs and incorporated a new policy on project funding to require justifications for additional funding; and (7) DOE began developing procedures for independently reviewing sponsors' final project reports to ensure that they include sufficient and accurate information for potential users of the technologies, and plans to complete the procedures by late 1991.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: DOE completed its report on lessons learned from its experience in implementing its policy to recoup the federal investment in successfully commercialized technologies developed under the Clean Coal Technology demonstration program. The report discussed the evolution of the recoupment policy for the clean coal program and provided input and guidance to DOE's Department-wide recoupment policy that is being developed as a result of a recommendation in another GAO report (GAO/RCED-96-141, June 26, 1996). GAO will prepare an accomplishment report when DOE's department-wide recoupment policy, which is undergoing review, is finalized and approved. DOE expects the policy to be approved by the end of December 1998.

Recommendation: The Secretary of Energy should direct the Assistant Secretary for Fossil Energy to analyze the effect that recoupment provisions have had on industry participation in the CCT Program and the likelihood of recovering the federal investment. On the basis of this analysis, DOE should reevaluate its recoupment policy to determine whether it should be strengthened to provide greater assurance that the federal investment in successfully demonstrated technologies will be recovered.

Agency Affected: Department of Energy

Status: Closed - Implemented

Comments: DOE contends that it has increased the weight given to financial viability considerations in selecting more recent projects and that the recommendation is now unnecessary. The GAO report acknowledged that this and other related actions are steps in the right direction. However, DOE continues to rank all projects for selection consideration, regardless of their financial situation.

Recommendation: To obtain maximum benefits from CCT Program funds, the Secretary of Energy should direct the Assistant Secretary for Fossil Energy to make projects ineligible for selection if their financing or economic viability is in doubt.

Agency Affected: Department of Energy

Status: Closed - Implemented

Comments: DOE believes that the goal of this recommendation is being achieved by its current project proposal evaluation procedures. DOE does not plan to evaluate the potential incremental benefits of investing federal funds in individual projects and select projects with the largest potential payoff, as GAO suggested. Therefore, this recommendation is being closed.

Recommendation: To obtain maximum benefits from CCT Program funds, the Secretary of Energy should direct the Assistant Secretary for Fossil Energy to determine that the potential market for the proposed technology is large enough to warrant demonstrating the commercial application of the technology with federal funds.

Agency Affected: Department of Energy

Status: Closed - Not Implemented

Comments: DOE contends that it cannot determine whether a technology is likely to be commercialized without federal funds. Although GAO believes that DOE can and should make such an assessment before selecting a project, this recommendation is being closed because 1 year has elapsed since GAO provided its followup views to the congressional subcommittee that requested the review.

Recommendation: To obtain maximum benefits from CCT Program funds, the Secretary of Energy should direct the Assistant Secretary for Fossil Energy to include as a factor in project selection decisions an assessment of whether the technology to be demonstrated is likely to be commercialized without federal assistance and avoid selecting technologies that could advance in the marketplace without federal funding.

Agency Affected: Department of Energy

Status: Closed - Implemented

Comments: DOE has established a new concept called a post-project assessment report that will discuss DOE independent assessment of a technology, the success of the demonstration in collecting needed data for commercialization, and the expected costs and environmental benefits. DOE has issued a report on one completed project and is scheduling time frames for completing other reports. This procedure and the public reports should fulfill the objective of the recommendation.

Recommendation: The Secretary of Energy should direct the Assistant Secretary for Fossil Energy to complete the development of procedures for assessing and reporting on the adequacy of sponsors' final project reports.